The international credit rating agency Moody's has raised the long-term credit rating of the City of Zagreb and the Zagreb Holding multi-utility conglomerate by two notches, from Ba1 to Baa2, that is from a speculative to an investment grade, with a stable outlook, the City of Zagreb said on Wednesday.

“We are glad that Moody’s has recognised the financial stabilisation not only in the City of Zagreb but also the restructuring of Zagreb Holding, which was necessary for the City of Zagreb and Zagreb Holding to withstand new challenges caused by global circumstances,” Zagreb Mayor Tomislav Tomasevic said, commenting on the upgrade of the rating.

After the decision to raise Croatia’s credit rating, the agency expects the upgrade of the rating will positively affect the City of Zagreb and Zagreb Holding following the introduction of the euro, having in mind the strategic position of Zagreb within Croatia. A stable outlook related to the credit rating of the City reflects its financial stabilisation and a medium-term reduction in debt burden, the City said.

Moody’s says that Zagreb’s Baa2 rating reflects its large and diverse local economy, which contributes to a tax revenue base with low volatility and a positive growth trend. It also noted that the debt of some of the City-owned companies would continue to decline in the medium term thanks to better financial results.

The agency stated that Zagreb’s solid institutions and its governance strength are reflected in a governance issuer profile score that is neutral to low. The City’s high credibility contributes to this, as it manages its operations using prudent financial planning, which allows for multi-year forecasting of key trends, the press release reads.